SubscribeTax Credit Extended, Markets Further Stabilizing and Real Estate Ideal Hedge
November 11, 2009
Tax Credit and Conforming/FHA Loan Limit Extended
Made official on Friday, the tax credit for home purchases was extended through July 1, 2010 and the important details are exactly as they were in my post on Friday the 30th of October, which was summarized as follows:
· Effective on binding real estate contracts from December 1, 2009 through April 30, 2010, The tax credit would be $8,000 for first time home buyers and $6,500 for move-up buyers who have owned their current home for at least five years
· The tax credit expires on April 30, 2010; however, if a binding contract is reached by April 30, 2010, buyers have an additional 60 days to close the deal and still be eligible for the tax credit
· For purchases made in 2010, taxpayers would be able to claim the credit on their 2009 income tax return
· The income limits for both first time home buyers and move-up buyers would be $125,000 for single return and $225,000 joint return.
· Cost of the home may not exceed $800,000 to be eligible.
Remember that a tax credit has about THREE TIMES the impact of a tax deduction, which allows someone earning $125,000 per year to be taxed on about $102,000*. And since other items like interest and property taxes are also deductible*, that same individual may be looking at less than half of their earnings being fully taxable..!*
Add the above news to the fact HUD also extended the conforming loan limit of $729,750 in the Bay Area to December 31, 2010, and you have a “perfect storm” for every qualified first-time buyer in the Bay Area.
S&P Case-Shiller Confirming Further Improvement of Housing Prices
Released last week, the S&P Case-Shiller index confirms that housing prices continue to improve, especially in areas like San Francisco where the index moved another 2.8% in August to 132.47. This marks the seventh straight month of improvement.
Zillow also reported that their index reflected further stabilization for the third quarter, with over 26% of the metropolitan statistical areas showing signs of improvement.
Real Estate as an Ideal Hedge to Both the “W” Concern and Inflation
You may recall from my last post that we are seeing far more application activity for purchases in the $1mm+ range, especially the $1.5mm to $4mm range. These applications have been coming from our more financially-minded clients, as they not only see tremendous opportunity to obtain a more valuable home, but they are very concerned about a “W”-shaped economic recovery and subsequent inflation. As such, obtaining an upgraded home for less, cheap financing and hedging against inflation make buying a larger home an ideal move. All things being relative, the reality is that the S&P 500 currently has a rather high price-to-earnings ratio at about 19.52 versus the historical average of 15.7. As such, if we were in average economic circumstances, it’s arguable that the stock market is overvalued by about 25%. Given the fact that our current economy is FAR from being in average condition, it’s anyone’s guess just how overvalued the stock market is. All I know is that my savviest, financially-minded clients think that the stock market is due a correction and that real estate is a great asset to have as a hedge against both a market correction and inevitable inflation.
Fannie’s New Program: Deed for Lease
Announced on November 5, Fannie Mae is helping those qualified applicants to essentially sell and lease back their current home. This program is also applicable to investment-property owners who are facing foreclosure and wish to deed the property over to the lender and allow the renters to continue renting at market levels.
Rates and Activity
- Rates continue to run as low as 3.75%, depending on a number of different factors, with the conforming 30-year at just under 5% and the jumbo 30-year at about 4.75%
- 71% of our transactions last month were purchases, and the average loan was in the $500k range.
- As mentioned above, we’re seeing a heavy trend in purchase applications for the move-up market, but inventory is turning off a majority of those buyers
- We closed a deal in TWO weeks, but we still recommend a 30-day closing period
- If you or someone you know prefers to pay cash for a purchase, then finance that purchase within 90 days to protect valuable tax advantages, we can help, as we have programs that DO NOT require 6 months seasoning and pricing is based on purchase money, NOT a cash-out refinance
* Does not constitute tax advice. Please seek any qualified tax professional for proper guidance.
Menlo Park: Laid back suburban living
December 26, 2006
Lying across the San Francisquito Creek and just to the north and west of its bigger, brasher neighbor Palo Alto, Menlo Park is the epitome of upscale suburban Silicon Valley living. Bounded roughly by Highways 101 and 280 and the cities of Palo Alto, Atherton, and Redwood City, Menlo Park is as well-manicured as it is wooded.
Apart from its natural beauty, Menlo Park’s denizens are proud, and rightly so, of its school system, which include the eponymous Menlo Park Elementary School District and the Las Lomitas School District (both of which it generously shares with Atherton) and the Sequoia Union High School District for the older students.
The shopping district centers around Santa Cruz Ave from El Camino Real to University Drive and boasts furniture stores, upscale salons, a toy store, numerous high-end restaurants (including The Left Bank), a wonderful 70’s vintage breakfast hangout named Anne’s Coffee shop (where one devotee has taken the time to upload a Youtube video), and Drager’s, which performs the amazing feat of making Whole Foods look like an inexpensive Safeway clone. Santa Cruz Ave is pretty quiet after 8:00pm, a sure sign that Stanford students prefer the glitz and glamor of Palo Alto’s University Ave.
While Palo Alto boasts the world-class university Stanford, Menlo Park’s contribution to Silicon Valley’s unique entrepreneur-laden business ecosystem is the venture capitalist heaven Sand Hill Road, an otherwise nondescript stretch of road running from El Camino Real to Highway 280.
The neighborhoods to the north and west of Menlo Park — Fair Oaks, Flood Park, and the Willows — are where you’ll find the city’s starter homes adjacent to Highway 101, with prices for a 1400 sq ft, 3 bedroom, 2 bathroom home starting in the mid-$700,000’s. Prices rise rapidly each block south and east of the highway, with the nicer and larger homes deep in the Willows running a tidy $1.6 million.
The Menlo Oaks neighborhood, bounded roughly by Bay, Willow, Middlefield, and Ringwood, boasts some of the largest homes and lots in this area of meandering streets and wonderfully old and large Oak trees. Crossing Middlefield, you come to the Allied Arts/Downtown neighborhood which includes the Allied Arts Guild. Further west brings you to the West Menlo and Alameda neighborhoods.
